1. Field of the Invention
The present invention generally relates to an accounting method and to an accounting system for a company that uses absorption costing represented by standard costing, and more particularly, relates to an accounting method and to an accounting system that transmits a client including the company employees accounting data through a computer information network processing the accounting data which are based on standard costing, draws break-even charts including a marginal profit chart corresponding to standard costing, and provides the client with the charts through the computer information network.
2. Description of Related Art
Generally, people may not have a sense of the relationship between costs (C), volumes (V) and profits (P) (hereinafter, referred to as CVP) even while looking at figures in a profit and loss statement (hereinafter, referred to as P/L), but can have a sense of the CVP relationship when the relationship is represented in a chart. Since the end of the 19th century, in Japan, the United States of America and other countries, public P/Ls are generated based on absorption costing in accordance with financial accounting standards. In absorption costing, manufacturing overhead is allocated not only to goods sold but also to inventory. This has caused a great deal of difficulty in generating the CVP charts.
Standard costing is believed to have originated in England around 1870, that is, the end of the development of the industrial revolution, and standard costing is a representative example in absorption costing and a historical costing method. In this specification, the term “standard costing” is used instead of the term “absorption costing”. In standard costing, manufacturing overhead composed of fixed costs and variable costs is converted into variable costs as manufacturing overhead allocation costs, which are standard costs; and the variable costs are added to the costs of goods sold and inventory. Then, in accordance with accounting standards, the manufacturing overhead costs included in the goods sold and the inventory are reduced or increased using cost variances such that the standard costs are equivalent to the actual costs, thereby determining the costs of the goods sold and the inventory. Therefore, in standard costing, the manufacturing overhead allocation costs included in the inventory have an effect on a current operating profit.
In order to eliminate this effect, direct costing was proposed by Jonathan N. Harris in the United States of America in 1936. Direct costing is a method that considers only direct variable costs as manufacturing activity costs, and separately treats the fixed manufacturing costs as a period cost, much like a general administrative cost. Since manufacturing overhead is not allocated to the inventory in direct costing, it is possible to easily make a break-even chart (CVP chart). Direct costing is currently not recognized for formal financial statements, but is positioned as a powerful method for management accounting. In this way, standard costing widely appears in accounting textbooks as a basis of accounting because of the necessity in financial accounting to determine the cost of goods sold and the inventory. However, since standard costing is disadvantaged in that it produces no profit charts, when it comes to management accounting, the use of standard costing is rather than not being recommended currently excluded, and direct costing is being recommended.
The applicant of this invention managed a company for a long period of time, and the company's costing method was standard costing. In the meantime, personal computers (hereinafter, referred to as PCs) have been rapidly spreading through the world. In general, it is said that the purpose of management accounting is for employees of a company to quickly provide a corporate manager with clear business management data including P/Ls. The applicant wanted to widely and quickly provide P/Ls as a yearly budget document, a monthly report and a closing statement through a company's network using PCs; the P/Ls are useful for each of the company members in order to make decisions on business activities; the members comprise ranks of employees including those in business line departments, manufacturing indirect cost departments and sales departments; the number of ranks of employees is much greater than that of managers and accounting employees.
Monetary sales amount is denoted by X. For convenience, in standard costing, manufacturing direct costs in all business line departments are assumed as actual costs, and all direct costs (actual costs) in manufacturing overhead costs are moved into manufacturing direct costs. Let DX denote the manufacturing direct costs. In this case, a current manufacturing overhead C (actual cost) is a fixed cost. Let ACY denote the total amount of manufacturing overhead allocation costs. The cost C is allocated to the goods sold by ACY(0) and to the inventory carried forward by ACY(+) as the total allocation costs being ACY. This is represented by the equation of ACY=ACY(0)+ACY(+). Let denote ACX(−) previous-period carryover manufacturing overhead allocation costs distributed to goods sold; and ACX the total current manufacturing overhead allocation costs distributed to goods sold. Then the equations ACX=ACX(−)+ACX(0) and ACX(0)=ACY(0) are obtained. Here, the sign ‘η’ is defined so as to satisfy T1=ACX(−) ACY(+)=ACX−ACY. If we denote absorption costs in absorption costing by EM, we obtain EM=DX+ACX. Let πO denote a sales operating profit defined in financial accounting.
In standard costing, on a manufacturing floor, a “gross profit QM in management accounting” is understood as QM=X−EM=X−DX−ACX, and maintaining a QM or a QM/X is continuously demanded from company management. Meanwhile, a “gross profit (sales gross profit) Q in financial accounting” is determined by Q=X−DX−(C+ACX(−)−ACY(+))=X−DX−C−ACX+ACY, and the company aims at making a Q. Since QM≠Q, each concept of both gross profits is different.
In Japanese Laid-Open Patent Application Publication No. H09-305677, the applicant reported a theoretical formula-derivation method for drawing a profit chart applicable to practical accounting for a standard costing P/L. In the method the treatment of QM was put at the center of the theoretical analysis. Thereafter, as described in U.S. Pat. No. 7,302,409, the applicant found that the issue had been studied and disclosed in 1968 by D. Solomons; and a chart drawing method and a standard-costing break-even point formula have appeared in textbooks. Furthermore, Solomons' theory is explained in detail in U.S. Pat. No. 7,302,409. However, his chart drawing method is not applicable in practical accounting and the standard-costing break-even point formula is different from that derived here by the applicant.
There can be only one solution for any mathematical problem. The applicant further studied, verified and presented, in U.S. Pat. No. 7,302,409, that the break-even point formula and the profit chart represented in Solomons' theory are wrong; and that the break-even point formula and the profit chart presented by the applicant are correct. Therefore, in standard costing, we have only the method presented here as the method for generating a profit chart which gives an answer of πO and which is applicable to practical accounting.